NEW DELHI: India's car industry suffered its steepest decline in sales during the current financial year as eroding customer confidence hit sales in February. This is in rank contrast to February 2012, when carmakers reported their biggest sales increase during that financial year.

Maruti Suzuki and Hyundai, India's largest carmakers by sales, led the drop to register their second successive monthly decline, even as Mahindra and Mahindra and French carmaker Renault bucked the general trend, helped generously by burgeoning demand for their SUVs in February.

However, with the government raising excise duty on SUVs to 30 per cent from 27 per cent in the Budget, the rise in SUV sales may be difficult to sustain.

The largest carmakers — Maruti Suzuki, Hyundai and Tata Motors — which comprise 80 per cent of the Indian passenger vehicles market, were the most affected and preliminary sales data furnished by different carmakers reveals that the decline could be in the range of 20-21 per cent in February, steeper than January's 12 per cent year-on-year decline.

The country's largest carmaker, Maruti Suzuki, reported a 9 per cent dip in sales to 97,955 units in February from 1,07,653 units in the same month last year.

Sales of its mini-segment cars such as the Maruti 800, A-Star, Alto and WagonR fell 15.87 per cent to 41,311 units during the month from 49,104 units sold in February 2012. The compact segment (comprising Estilo, Swift and Ritz models) witnessed a 14 per cent dip in sales to 24,021 units. But compact sedan DZire proved to be the silver lining in a depressed market, with a 21.56 per cent increase to 18,316 units in February.

Maruti has already revised its growth projection for 2013 and its top executives said they are now expecting a lower single-digit growth following the changes in the Budget. South Korean carmaker Hyundai saw a 7.6 per cent decline in domestic sales to 34,002 units even as exports jumped 37 per cent to 20,663 units.

"The market was depressed. There was a drop in enquiries with lower rate of conversions to purchase. The increase in fuel prices negatively impacted the already low market sentiments. We expect the challenge to continue in the next quarter following these moves in the Budget," Rakesh Srivastava, Hyundai vice-president (sales and marketing), said.

The country's third-largest carmaker, Tata Motors, suffered its worst decline in the fiscal, with a 70 per cent drop to just 10,613 units sold in February. Sales of the Nano, Indica and the Indigo range stood at 7,769 units while 2,844 units of the Sumo, Safari, Aria and Venture range were sold in February. The company did not disclose reasons for this drastic fall and added it had exported 3,996 vehicles during the month.

The pessimism in the market impacted other carmakers too, though in a slightly lower proportion. Toyota Kirloskar sales declined 23 per cent to 12,756 units in the domestic market. Following the excise duty hikes in the Budget, Toyota hiked prices by Rs 30,000 and Rs 75,000 on the Innova and Fortuner models, respectively.

Toyota Deputy Managing Director and Chief Operating Officer (marketing and commercial) Sandeep Singh said, "The market continues to remain sluggish and with the additional excise duty levied on sports utility vehicles and utility vehicles, the market will be further impacted." General Motors India, which registered a 20 per cent decline in sales to 7,106 units in February, echoed a similar sentiment of weak sales in the coming months due to Thursday's Budget proposals.